Why the nationwide bill payment network BBPS is a revolution in making

BBPS began with eight banks, bill payment aggregators and a few utilities to test the technology platform developed by the NPCI.ET CONTRIBUTORS | August 20, 2017, 10:24 IST

Bill payments of going digital helps the country build data on the creditworthiness of consumers.By AP Hota, NPCI

Can you think of a scenario where Gopal Jena working in Kolkata can pay the electricity or DTH bill of his household at Pipli in Odisha, by visiting a nearby citizen service outlet, so that his aged parents or family do not have to worry about monthly expenditure? Mobile recharges are already happening in a big way.

The idea is to have bills of any type paid from anywhere using an interoperable bill payment network for the whole country. In August 2016, the National Payments Corporation of India (NPCI) had a pilot launch of Bharat Bill Payment System (BBPS).

It began with eight banks, bill payment aggregators and a few utilities to test the technology platform developed by the NPCI and to build the business case for bill collection through a national platform.

The pilot involved bringing the billers on one side and the bank customers on the other side through their service providers to the central platform. While the service providers from biller side and customer side are referred to as Bharat Bill Payment Operating Units (BBPOUs), the central platform being provided by the NPCI is called Bharat Bill Payment Central Unit (BBPCU).

The NPCI organises clearing and settlement of transactions processed through the central unit.

The NPCI has received the final authorisation from the RBI to run the central unit as a strategic business unit (SBU). It has to facilitate the spinoff of the bill payment function from the NPCI, if needed. This is a sensible move by the RBI so that the thrust is on accelerating the pace of digital payments in the country.

Meanwhile, the number of BBPOUs participating in the pilot has grown to 25, including three public sector banks, 10 private banks, five cooperative banks and seven non-bank entities like prominent bill aggregators BillDesk, Tech-Process and Euronet.

A number of banks, including SBI, are under technological development for joining BBPS. The RBI decides the types of bill payments that could be routed through BBPS.

Currently, only five categories of utility bills are permitted through NPCI — power, telephone, DTH, water and gas. The number of billers on BBPS has increased to 42 — 20 for power, 10 for telephone, six for gas and three each for DTH and water.

About 10,000 bills are paid through BBPS in a day and the number is growing. Admittedly, the volume is not in lakhs as is the case with other payment products of the NPCI, but enabling conditions have now been created and the RBI’s final clearance is the indication that the project has come to a takeoff stage.

First, the engagement of banks and billers with BBPS has been remarkable during the past few months. Though 25 operating units are fully functional, 10 more are under certification. While Bank of Baroda, Union Bank of India and Indian Overseas Bank have already joined, SBI will go live shortly.

Pricing issues have been resolved to the satisfaction of all major players. Considering that bill payment is a universal activity, RBI will certainly find ways and means to make all the banks a part of the system as has been done for the National Automated Clearing House (NACH) system where nearly 1,400 banks are participants.

Second, a few bill aggregators — BillDesk, Tech-Process, Euronet, PayU and Paytm — have created their own ecosystem of bilateral arrangements with banks/ prepaid institutions on one side and billers on the other. Though the market is dominated by BillDesk and TechProcess, new players have emerged and the competition will bring innovations.

BBPS will help new operators to offer more efficient solutions. The purpose of BBPS is also to intensify competition among aggregators and bring them all under a national platform.

BBPS alone cannot connect to thousands of large billers in the country. Such competition will also drive standardisation and reduction of service charges that are now levied by aggregators on billers.

The RBI would also be able to bring aggregators under a greater degree of control through the standard operating procedure of BBPS. The RBI issued a circular last year to the effect that entities undertaking the business of billing under BBPS would be required to become an agent of an authorised BBPOU or exit the business of bill payments covered under BBPS by May 31, 2017. This has now been extended to December 31, 2017.

Third, the standard operating practices of billers vary. It is not only the format of electricity bills that differs from biller to biller, but also billing cycles and bill presentment.

In certain states, electricity bill payment cycle is once in two months. As adoption of digital payment grows, billers would like to go for a monthly cycle and offer all possible options to customers to make payments on time.

Timely collection of bills will change the way billers manage their cash balance. Now they allow banks to hold the amount as float money for a long time. Against this benefit, the banks offer collection facility free of charge, knowing well that the more inefficient the bill collection, the greater is the chance to gain from float money.

With BBPS being rolled out widely, billers could bring efficiency in utility bill collection system and have better working capital management. In the electricity sector, banks have agreed to a uniform interchange of Rs 2.25 to collecting bank/non-bank operating unit per bill when paid through BBPS. What the aggregator (biller’s bank/operating unit) would charge the biller would be left to it based on the scope of the bill payment service and the fees to be paid to other participants in the BBPS system. Such transparency in pricing will bring greater order in other categories of bills.

Target 25 Billion

Fourth, for achieving the target of 25 billion digital payments in the current year, Ministry of Electronics and Information Technology has fixed a tough target of 1 billion transactions to be coordinated by the Ministry of Power and 5.6 billion transactions from the Ministry of Telecommunications.

The Ministry of Power has advised state governments to prod power distribution companies to join BBPS. Expectation is that of the approximate 1.6 billion electricity bills generated each year, if 60% is paid electronically, the sector as a whole can meet the target.

The success of Pradhan Mantri Jan Dhan Yojana (PMJDY) has demonstrated that if the government is determined, the so called impossible tasks can be done easily; opening of close to 200 million bank accounts in just one year was possible due to the efforts of all.

The target of 25 billion digital payments is being monitored with the same passion and dedication. Bill payments through digital platforms is a key component of this mission and early indications are positive. It is precisely for this reason that the government has asked the NPCI to add bill payment functionality on BHIM mobile banking package.

Bill payments of going digital helps the country build data on the creditworthiness of consumers. The data could be used by banks and lending institutions to offer credit to consumers.

As more and more small consumers avail of primary utility services like electricity and mobile and make payments electronically, credit history would get enriched. Therefore, the bill payment system should not be treated in isolation. India stands to become a datarich country with BBPS gaining ground and consumers paying their bills digitally.